Continuation Transaction -- Multi-Fineline Electronix Inc.(MFLX)

The Covered Calls Advisor Portfolio(CCAP) position in Multi-Fineline Electronix Inc.(MFLX) was out-of-the-money at Nov09 expiration. Today it was decided to retain the 400 shares of Multi-Fineline Electronix Inc.(MFLX) and to establish a Feb2010 covered calls position as follows:

12/03/09 Sell-to-Open (STO) 4 MFLX Feb2010 $30.00s @ $.95

The transactions history to date and the profit potential for the continuation covered calls position in MFLX is as follows:
10/22/09 Bought 400 MFLX @ $27.50
10/22/09 Sold 4 MFLX Nov09 $30.00 Calls @ $.80
11/21/09 Nov09 Options Expired
12/03/09 Sell-to-Open (STO) 4 MFLX Feb2010 $30.00s @ $.95
Note: The price of MFLX was $26.29 today when this transaction was made.

Some possible overall performance results(including commissions) for this MFLX covered calls position would be as follows:
Stock Purchase Cost: $11,008.95
= ($27.50*400+$8.95 commission)

Net Profit:
(a) Options Income: +$676.10
= (400*($.80+$.95) - 2*$11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation(If stock price unchanged from current $26.29): -$492.95
= ($26.29-$27.50)*400 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $30.00): +$991.05
= ($30.00-$27.50)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $26.29): +$183.15
= (+$676.10 +$0.00 -$492.95)
Total Net Profit(If stock exercised at $30.00): +$1,667.15
= (+$676.10 +$0.00 +$991.05)

Absolute Return if Stock Price Unchanged at $26.29: +1.7%
= +$183.15/$11,008.95
Annualized Return If Unchanged (ARIU): +5.0%
= (+$183.15/$11,008.95)*(365/121 days)

Absolute Return if Stock Exercised at $30.00: +15.1%
= +$1,667.15/$11,008.95
Annualized Return If Exercised (ARIE): +45.7%
= (+$1,299.10/$11,008.95)*(365/121 days)

Returns -- Through November 2009

This report presents the Covered Calls Advisor Portfolio (CCAP) performance results through November 2009.

1. Month of November 2009 Result:

The Covered Calls Advisor Portfolio increased by 2.41% for the month of November 2009. In comparison, the benchmark Russell 3000 index (IWV) increased by 5.78% for the month.


2. Year-to-Date Through November 2009 Results:

The 2009 Year-to-Date results are as follows:

CCAP Absolute Return (Jan 1st through November 30, 2009) = +34.20%
= ($268,041.81 - $199,733.10)/$199,733.10

Benchmark Russell 3000(IWV) Absolute Return (Jan 1st through November 30,2009) = +22.83%
= ($63.87 - $52.00)/$52.00

For the first eleven months of 2009, the table below shows that CCAP has outperformed the Russell 3000 benchmark by 11.37 percentage points (34.20% - 22.83%):

















3. Prior Years Results:

The Covered Calls Advisor Portfolio (CCAP) was begun in September, 2007. The annualized returns achieved for 2007 and 2008 compared with the Russell 3000 benchmark results were as follows:








Note: This Covered Calls Advisor uses a bottom-line performance measure to determine overall portfolio investment performance results -- it is called 'Total Account Value Return Percent'. A simple example demonstrates how it is calculated:
If the total CCAP portfolio value was $100,000 at the beginning of the calendar year and $110,000 at the end of that year (and with no deposits or withdrawals having been made), then the 'Total Account Value Return Percent' would be +10.0% [($110,000-$100,000)/$100,000]*100.

If you have any comments or questions, please feel free to submit them by clicking the 'comments' link below. If you prefer more confidential correspondence, my email address is listed at the top-right sidebar of this blog site.

Regards and Godspeed,

Jeff

Establish iShares MSCI China ETF Covered Calls

An additional covered calls position was established today in iShares MSCI China ETF (FXI) as follows:

Established iShares MSCI China ETF (FXI) Covered Calls for Dec09:
11/27/09 Bought 400 FXI @ $42.54
11/27/09 Sold 4 FXI Dec09 $44.00 Calls @ $1.13

China continues to rank #1 in this advisor's '2009 Country Value Rankings'.
Some of the key value-oriented metrics for China are as follows:
- Real GDP growth of approximately 8.5% in 2009 and 9.0%+ in 2010. This compares with a projection of slightly negative growth this year in most of the world's major developed countries and perhaps 2.0% to 4.0% in 2010.
- Estimated current-year inflation of 0% to 1% in China.
- Price/Book ratio of 3.03 is a below-average valuation relative to many other countries (for example, the U.S. S&P 500 is currently at 3.37).

The FXI ETF was selected as the primary investment vehicle for achieving wide exposure to China's stock market performance. It consists of market-cap-weighted positions in the 25 largest companies in China, and although it is most heavily weighted in the financial, energy, and telecommunications sectors, it still provides a relatively good way to diversify across the Chinese economy. Since China remains as the Covered Calls Advisor's top investment idea, a major commitment of 17% of the total CCAP is now allocated to FXI covered calls. Moreover, as a direct reflection of this Advisor's current bullishness regarding China, a bullish covered calls position(3.4% out-of-the-money) was established. Normally, the Covered Calls Advisor establishes buy/write positions by buying the underlying equity and simultaneously selling the call options. However, because of the news regarding the possible delay in Dubai's debt payments and the associated substantial sell-off at the market's open today, it was decided to leg-in to this covered calls position by buying the 400 shares of FXI at $42.54 soon after the market opened. Ninety minutes later, when FXI had risen to $43.41 the Dec09 $44.00 options were sold at $1.13.

Some possible overall performance results(including commissions) for this FXI investment would be as follows:
Stock Purchase Cost: $17,024.95
= ($42.54*400+$8.95 commission)

Net Profit:
(a) Options Income: +$440.05
= (400*$1.13 - $11.95 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation(If stock price unchanged at $42.54): -$8.95
= ($42.54-$42.54)*400 - $8.95 commissions
(c) Capital Appreciation (If stock exercised at $44.00): +$575.05
= ($44.00-$42.54)*400 - $8.95 commissions

Total Net Profit(If stock price unchanged at $42.54): +$431.10
= (+$440.05 +$0.00 -$8.95)
Total Net Profit(If stock exercised at $44.00): +$1,015.10
= (+$440.05 +$0.00 +$575.05)

Absolute Return if Stock Price Unchanged at $42.54: +2.5%
= +$431.10/$17,024.95
Annualized Return If Unchanged (ARIU): +42.0%
= (+$431.10/$17,024.95)*(365/22 days)

Absolute Return if Stock Exercised at $44.00: +6.0%
= +$1,015.10/$17,024.95
Annualized Return If Exercised (ARIE): +98.9%
= (+$1,015.10/$17,024.95)*(365/22 days)

The downside breakeven price for this out-of-the-money position is $41.41 ($42.54-$1.13), and as such provides a downside profit protection of up to 2.5% below the purchase price.

Establish Dresser-Rand Group Inc. Covered Calls

A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Dresser-Rand Group Inc. (DRC) covered calls as follows:

Established Dresser-Rand Group Inc. (DRC) Covered Calls for Dec09:
11/25/09 Bought 300 DRC @ $29.30
11/25/09 Sold 3 DRC Dec09 $30.00 Calls @ $.60

Dresser-Rand Group Inc. manufactures steam and reciprocating compression turbines for the oil, gas, petrochemical and related industries. It also sells replacement and upgrade parts, as well as maintenance, installation, upgrade, overhaul, monitoring and repair services for both its own equipment and the equipment of other manufacturers. The company is the leading supplier of rotating equipment in the U.S. and is one of the top three suppliers worldwide, with manufacturing facilities in the U.S., France, Germany, Norway, India and Brazil.

The 'Buy Alerts' spreadsheet below shows that DRC has a 'Total Points' rating of 20.22 which exceeds the Covered Calls Advisor's desired threshold of 20.0 points.
























Note: For expanded view, left click on the spreadsheet above.


Some possible overall performance results(including commissions) for the DRC transactions would be as follows:
Stock Purchase Cost: $8,798.95
= ($29.30*300+$8.95 commission)

Net Profit:
(a) Options Income: +$168.80
= (300*$.60 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $29.30):
-$8.95 = ($29.30-$29.30)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $30.00): +$201.05
= ($30.00-$29.30)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $29.30): +$159.85
= (+$168.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $30.00): +$369.85
= (+$168.80 +$0.00 +$201.05)

Absolute Return if Unchanged at $29.30: +1.8%
= +$159.85/$8,798.95
Annualized Return If Unchanged (ARIU) +27.6%
= (+$159.85/$8,798.95)*(365/24 days)

Absolute Return if Exercised at $30.00: +4.2%
= +$369.85/$8,798.95
Annualized Return If Exercised (ARIE) +63.9%
= (+$369.85/$8,798.95)*(365/24 days)